OPERATION MANAGEMENT IN

STATE BANK OF INDIA

By:
ABHINAV GUPTA
AMIT PANDEY
BHASKAR SINGH
MUKESH SAROJ
SAGAR KUNDU
UDITA AGRAWAL
Table of Contents
1. Introduction
2. Comparison
3. Value Chain
4. Strategy Formulation Process
5. Constraint of Services
6. Forecasting
7. Challenges
8. Inventory
9. Human factor in operations
10. Location
11. Layout
12. Instances of Success
13. References
 Introduction

State Bank of India (SBI) is a Public Sector Banking Organization

(PSU), in which the Government of India is the biggest shareholder.

It is the largest bank in India and is ranked at 380 in 2008 Fortune

Global 500 list, and ranked 219 in 2008 Forbes Global 2000.

Measured by the number of branch offices, SBI is the second largest

bank in the world. SBI traces its ancestry back to the Bank of
Calcutta, which was established in 1806; this makes SBI the oldest
commercial bank in the Indian subcontinent.

SBI provides various domestic, international and NRI products and

services, through its vast network in India and overseas.
With an asset base of $126 billion and its reach, it is a regional
banking behemoth. In 2008 SBI was ranked 380 from a rank of 495
in 2007.

As per fortune 500‐2008 following are the data for SBI in $ million.
Revenues: 22,402.2
Profits: 2,225.0
Assets: 255,854.9
Stockholders' Equity: 15,263

The SBI group companies include SBI Capital Markets Ltd, SBI
Mutual Fund (A Trust), SBI Factors and Commercial Services Ltd,
SBI DFHI Ltd, SBI Cards and Payment Services Pvt Ltd, SBI Life
Insurance Co. Ltd ‐ Bancassurance (Life Insurance), SBI Funds
Management Pvt Ltd, SBI Canada.
SBI was rechristened as State Bank of India in 1955 from
Imperial bank of India.

The decade of 2000s was a turning point in the Indian banking

industry. It brought out a major transformation in the working
style of Indian banks.

With several competitors gaining ground in Indian Territory,

SBI was facing constant threat of takeover. The exhibit below
maps the banking industry using porter’s five forces model.

The model shows that there is huge competition in the banking

industry and that the customer is the king. Banks that provide
good customer service and are responsive to the market in the
long run would win.
Brief history of transformation
at SBI
Associate banks
SBI has five associate banks:
State Bank of Bikaner & Jaipur
State Bank of Hyderabad
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
State Bank of Saurashtra - merged with SBI in 2008.
State Bank of Indore - merged with SBI in 2010.

Earlier SBI had only seven associate banks that, with SBI, constitute the
State Bank Group.

All use the same logo of a blue keyhole and all the associates use the "State
Bank of" name, followed by the regional headquarters' name.

Originally, the then seven banks that became the associate banks belonged
to princely states until the government nationalised them between October
1959 and May 1960
Branches of SBI

State Bank of India has 131

foreign offices in 32 countries
across the globe.

SBI has about 21,000 ATMs; and

SBI group(including associate
banks) has about 45,000 ATMs.

SBI has 26,500 branches,

including branches that belong to
its associate banks.

SBI includes 99345 offices in our

country.
Foreign Offices
State Bank of India is present in 32 countries, where it has 84
offices serving the international needs of the bank's foreign
customers, and in some cases conducts retail operations. The
focus of these offices is India-related business.

SBI has branches in these countries:

• Australia
• Bahrain
• Bangladesh
• Belgium
• Canada
• Dubai
• France
• Germany
• Hong Kong
• Israel
• Japan
COMPARISON
Customer Services

Percentage share of bank groups in total no of complaints

Source: RBI Annual Report 2009, retrieved on 10th March 2011

Though we find that complaints ratio is high from SBI(total average),it is still less
than average of public sector banks ratio. So more customer satisfaction measures
have to taken by SBI to win customer confidence and give him maximum satisfaction
Non-Performing Assets
Sector wise NPAs of domestic Banks(March End 2010)
Cost Of Funds And Return Of Funds
Return on Assets And Return Capital to risk weighted
On Equity of SCBS-Bank assets ratio(March 2010)
Group Wise(March 2010)
VALUE CHAIN
Detailed Generic Value Chain of the State Bank of India

Marketing Sales Products Trans-

Funding Investment Services actions
Advertising Acquisition Deposits Credits Acct. Mgmt. Payments

Branding Offering Securitization Securities Asset Mgmt. Trading

Sales Credits Fin. Products Issuance/IPO Clearing &

Multichannel
Support Management Corp. Invest. Settlement
M&A

Other assets Advis. Serv. Custody

Other Serv.

Risk Management
Technology Development
Human Resources
Firm Infrastructure

In comparison to the industrial value chain, the developed banking

value chain starts from the customer side.
Fist the product will be offered to the market, sold, provided to the
customer and finally corresponding transactions will be executed.
Additionally, Risk Management is introduced as supporting activity.
 A generic value chain for consumer credits in SBI

Marketing Sales Product Transaction

Multi Acquisition Clearing

Branding of Sales
Channel and Credit Funding Payments and
a Product Support

Consumer Credit
Mgmt. Offering Settlement

Process derived
• Introduci • e.g. • Managem • Determin • Collateral • Credit • Payment • Booking
ng a general ent of e financial evaluatio data to of of
brand offers to Sales via requirem n Treasury Interest Payment
e.g.
„easycre
custome
rs via
Internet,
branches •
ent
Identificat
• Rating of •
borrower
Refinanci •
ng of
Payment
of •
s
Governa
from the generic
dit“ in
the credit
letters and sales
banks
ion of
potential
• Final
pricing
Credit amortise
ment
nce of in-
time value chain
market collateral • Credit payment
• Advertisi s Approval s
ng • Pricing • Credit • Bad Loan
Account Mgmt./
opening Realisati
• Payout of on of
credit collateral
s

Risk Management: Management of Credit Portfolio and Credit Risk

Identify the resources allocated to the consumer credit process

Evaluation of in-
house efficiency
Calculate costs and revenues for each process step of value activities
Evaluate cost efficiency respectively value added for each process step
 STRATEGY
FORMULATION
PROCESS
Competitive
Order Qualifier/
dynamics at
Order Winner
market place

Strategic options for

Sustaining
competitive
advantage
Firm level Generic
strength and competitive
weakness priorities

Corporate
Strategy

Strategic
Measure for
decisions for Operational
corporate
operations Strategy
excellence
systems
Competitive Dynamics at the market place

The Indian banking sector is highly characterized by large no. of banks with
mixed ownerships

27 public sector banks

Total banks assets constitute more than 70% of GDP

Entry of new private banks and branches of foreign banks have given
a surge to the competition

Need to have a network not only in urban areas but most importantly
in rural areas.

Shift from being profit oriented to service oriented

ORDER QUALIFIER
Wide distribution network
Low transition cost
Government bank

ORDER WINNER
Trust, commitment and wide spread in rural area:
It is because of its trust which implies in the minds of the
public with the brand SBI. Also its reach is not only in
most developed areas but also in the remote villages that
makes it the most preferred bank to bank on. Ideally the
concept of financial inclusion after been coined by RBI is
best implemented by SBI in all other public banks.
Strategic options for sustaining competitive advantage
• SBI’s philosophy of opening new branches
• Technological up gradations to compete with highly
modernized private banks
• Maintaining a highly diversified portfolio so as to cater to
the varied needs of customers
• Better customer service management and providing quick
solutions to their needs.

Generic competitive strategies

• Institution for advanced learning
• Internal consultant/change agent
• Feedback supplier
• Think tank
• Research and development
Corporate strategy
“To be amongst most trusted power utility company of the
country by providing environment friendly power on most
cost effective basis, ensuring prosperity for its stakeholders
and growth with human face”.

Operational strategy
• Restructuring
• Alliance and tie ups
• New products and services
• Marketing initiatives
• Increase in the no. of branches
• Going retail in international operations
 
Measures for operational excellence

• Good Corporate Governance

• Excel in latest Technology

• Wide Spread Reach

• Good Supply chain Management

CONSTRAINT
OF
SERVICES
INTANGIBILITY
-Gold coins, Financial products, advertisements.
HETEROGENEITY
-ATM machines
INSEPARABILITY
-ATM, E-Banking
PERISHABILITY
-utilization of current cash deposits
FORECASTING
The basis for a forecast:
 As realistic as possible.

 Market expectation or model driven

 Fiscal policy

 Exchange rates

 Close relationship with statistical authorities

Why do state bank of India forecast

• Future Expansion

• Manpower requirement

• Cash reserves

• sustainability
CHALLENGES
Indian Banking Challenges: Customer Diversity

• India is a country of diversity and also of disparities.

• A number of Indians appear in Forbes's Billionaires list yet

India also has the largest concentration of poor

• Luxury cars and bullock carts share the same roads

• Skyscrapers coexist with slums

• First challenge is to provide quality service to all the

customer classes as per their needs
Indian Banking Challenges: Financial Inclusion

• On an all India basis 41% of adult population is

unbanked
• 500 million Mobile users but about half of them do
not have a bank account
• One bank branch caters to 16,000 individuals in
India, while a similar branch in developed countries
address the needs of 1,500 to 4,500 individuals.
• Second challenge is to reach 600,000+ villages and
provide Financial Inclusion
 Indian Banking Challenges: Scaling Up

• India’s economic growth: Second only to China

• Projected to overtake Germany as the world’s fifth
largest consumer market
• In two decades, Indian middle class (earning between
$4500 to $22000 per year) will be more than half a
billion strong
• Third challenge is to scale up to the growing demand
for banking services
Indian Banking Challenges: New Private Sector
Banks
RBI is planning to grant new banking licenses to
business houses and non-banking finance companies

It would lead to increase in number of private sector

banks
The SBI Story
Meeting the first challenge
To provide quality service to all the
customer classes as per their needs
 SBI: IT Architecture:
Enabling 24*7 IT Operations

Stakeholders Prospects
Customers

Mobile Help Call

ATM Banking Desk Centre
Internet Banking
Network of Branches

External Agents Resource Management

Shared operations centre(s)
Group Companies ALM

Associate Banks
Treasury
Other Banks & Alliances
OPERATING UNITS

RBI Product Development Risk Management

Corporate Office
WIDE AREA NETWORKING AND CORE BANKING
• All 17000+ branches of SBI Group are on Core Banking.
• Enabling Anywhere Anytime banking
• One of the largest private worldwide network
• Using Leased lines, ISDN, PSTN, MPLS, VSATs
• More than 25,000 touch points
 ATM Project
Numbers  Nearly 20,000 ATMs
Largest Bank owned network in the world

Card base  66 mn.- Largest card base in South Asia

Connectivity  Part land lines and part through VSATs
Daily Hit rate • 300 hits per ATM

Transaction  Average : 134 million per month

Volume
Cash dispensed  Rs. 330 billion per month

Value Added Services

Bill Payments, Payment of College/Hostel Fees
Card to Card transfer of funds
Donation to Temples / Trusts
Internet Banking
Retail Services Corporate Services
• Customer to Self • Business to Self
• Customer to Customer • Business to Business
• Customer to Utility Service
Provider
• Business to Employees
• Customer to Institutions • Business to Institutions
• Customer to e-commerce sites • Business to Government
• Customer to Government

No. of Users:
 4 million
5 million txns per month
 3.5 million Retail
 1.5 million Corporate
Services:
 Funds transfers (including through
RTGS & NEFT, Payment of utility
bills, Payment of taxes, Booking of
Rail/Air tickets
Mobile Banking

 Funds transfer using NEFT

 Enquiry Services (Balance enquiry / Mini
statement)
 Request Services (Cheque book request)
 Bill Payment (Utility bills, Credit Cards)
 m-Commerce (Mobile top up, Merchant
Payments, SBI Life Insurance premium)
 1.5 lac registered users
 10,000 transactions per day
The SBI Story
Meeting the second challenge

To reach 600,000+ villages and provide

Financial Inclusion
Financial Inclusion: SBI Initiative

 Enabled through Point of Sale (POS) instrument

and Smart Cards
 Reaching 100 thousand unbanked villages
 Over 1million ‘No Frills’ Savings accounts opened
 Government benefits paid directly to beneficiary's
account
 Operated through Business Correspondent model
The SBI Story
Meeting the Third challenge

To scale up to the growing demand for banking

services

49
Preparing for the future

 Scaling up technology infrastructure and inducting

cutting edge technology
-Enterprise Data Warehouse under implementation

 Revamping Network

 Scaling up ATM installations to 25000 within this year

 Opening 1000 branches every year

SBI: Biggest Bank in the Service of Smallest Customer

 More than 2 centuries of Trust

 Widest reach with more than
17000 branches of the group on
Core Banking
 Nearly 20000 ATMs of the group
 All branches enabled for Secure
Internet Banking and Mobile
Banking
 All branches enabled for RTGS
and NEFT
 State of the art Data Centre and
Disaster Recovery Site
 Enabled E-Government projects
 Technology driven Financial
Inclusion
INVENTORY
 Inventory

There are three type of inventory in bank:-

Stationary-pen, pencil, floppies etc

Security –bonds, mortgage paper, other important papers

Cash reserves
There are two ways through which they approach towards inventory

Annual approach:-bank approach toward CSD branch. Here CSD

frame a booklet in which there is a list of register, voucher and other
things are given.

Regular approach:-The branches are concerned towards the

goods which do not have any security risk and are used on a daily
basis like floppy, pen, pencil etc

While approaching towards inventory banks have to consider the

previous year consumption and is also affected by the objective of
enhancing the use of ATM, Mobile Banking.
Points to be considered

Minimum order quantity

Maximum order quantity

Too much investment in inventory will lead to the risk of blockage

of capital and probability of making it obsolete.

There are several levels in which hierarchy is followed to reduce the

error to zero-
Branch manager-regional manager-CSD

All these requirements are framed by branch head, who tries to

prevent over pilling of inventory and also try to reduce manhandling
cost involved in maintaining inventory.
Period of getting inventory from sources

The CSD department does exercise of forecasting the demand for

bank on the basis of previous year consumption.

When the branch places order to the CSD department, they match
their forecasting to the inventory demanded.

A branch usually places the order in March, which they receive in

July, and is used till June next year

The gap between placing an order and receiving an order is mostly

filled by the buffer stock maintained.
Inventory for a new branch

In case of new branch, the CSD department is already aware

of the set of inventory required.

There is a standard format of inventory in case of placing an

order for new branch, which the CSD department usually
follows.

Banks only provides the information that the inventory is

required for new branch then after sometime it is collected
from the office of CSD.
Security against inventory
 Securities(draft, cheque)
not pile up for 1 year because of following reasons:-
• Security risk
• Cost
• Checking the stock
• random verification is easy in case of small period
• Design change easily in small period to reduce wrong practice of
duplication.

 Cheque book:-
• In case of cheque book there are 50 leaflet inside it and after 45th
leaflet there is a request slip through which a customer places an
order for a new cheque book.
• Giving request slip before 5 cheque help them in order to avoid
inventory for cheque book and follow just in time process i.e.
customer places an order when 5 cheque is left and before it finishes
they get new cheque book.
Case of unexpected demand in bank

For handling unexpected demand banks use the

following techniques

 CSD has buffer stock to cover unexpected demand

 Purchase inventory from local shop except securities

 Inter branch borrowing technique

Handling the cash
• Every branch has retention time i.e amount of cash every branch can
hold with them. This limit is decided by estimated transaction place
in particular branch i.e as per inflow and outflow of cash in that
branch.

• In any branch of SBI, retention limit is not exceed 1% total deposit

and advance.

• After running the said software programme will show the daily
current balance at the time of running the software programme
along with the receipt & payment and cash retention limit of the
respective branch at the time of running the same.

• Many of the branches are not in need of cash viz-a-viz they are
having surplus cash which they need to deposit with the cash pool
where as some of the branches have to fulfil their cash requirement
daily or on alternate days.
• The official have to keep record in the register maintained at the cash
pool by telephonic enquiry with the branches volume of average daily
cash they require for ATM transactions which enables the cash pool to
take into account the daily cash requirement of the branches.

• On 7th & 10th of every month on which generally the salaries of the
customer are being credited at the branches and so also, the huge
withdrawals from the customers takes place on the said dates which
results into increase in daily cash requirement up to Rs 50 lacs to 70
lacs.
HUMAN FACTOR IN OPERATIONS
Training

• TRAINING FOR CLERKS:-

For clerks the training of 2 year is not so much required .in that case 15 day
orientation programme is done only.

• TRAINING FOR PO’s:-for PO the training of 2 year is compulsory and 15

day of orientation programme.
There are two ways of placing people on the post of PO:-
• Direct recruit:-they require 2 year training before joining and 1 week or
month training after joining according to the requirement.
• Internal promotion:-not require training

Mainly training of PO is done on training centers , apex colleges of SBI in

different cities
TRAINING PROGRAMES- STATE BANK ACADAMY

• The State Bank Academy (SBA), formerly known as State

Bank Staff College was set up at Gurgaon, on the 18th
November, 1982
• It is a centre for training middle and senior management
officials of the State Bank group and other organizations
in India and abroad.
• The programmes at SBA Gurgaon have attained a steady
- stream maturity over the years. SBA has imparted
training to over 19,000 managers during the past five
years
TRAINING PROGRAM contd…..

• Gurgaon visualizes an unfolding opportunity in the use of

new, technology enabled training methods as a supplemental
training medium

• To this end, it has designed and launched an institution-wide

e-learning programmes to be used by managers at various
branches of the bank

• This Endeavour is intended to deepen and lengthen the

collective training exposure of SBI managers.
Final induction

Proper guidance
New employee meet the right people on his first day of job.

Support
To good deeds

Motivation
Address the new employee by high rank officials to motivate
them and introduce the problem they face during work.
Forecasting of employee for new branch

It works as the objective of investing less money in new branch at

starting age.

They start with minimum number of employees to run a branch

about which they have knowledge due to their years of experience
in expanding.

Then they increase number according to the

requirement(workload)
Managing employee in peak seasons or
festivals

Cash requirement is reduce through ATM in festivals, so

automation is beneficial in this aspect.

For branch manager and accountant it is compulsory to take

sanction leave. They are not expected to take casual leave.

Core banking help consumer to take cash from any branch.

LOCATION
 Locating the branch/ATM

The Location planning of a new Branch is done in a following ways:-

Market Research: By this the bank find out which rural area is
suitable for opening branch. (No of villagers present and people’s
economic conditions etc
Other Banks are present their or not (penetration level)
Land rate in that area
Connectivity with nearest town etc.
Communication available like phone internet facility etc
Banks also monitor cash inflows and outflows from a particular
while choosing for land
Feedback from existing branches (like success and feasibility rate in

rural branches)
LAYOUT
OLD

Earlier layout of traditional SBI branch was having just 20% of

area available for customers while 80% are occupied by staff

At that time bank’s perception about customer is they need us for

their cash as well as for future safety.
NEW

Now days the layout of bank is fully changed now it becomes:-

-20%-staff occupy and 80% customer occupy

Now in bank huge space is covered as customer lobby and the back
office function is totally isolated.

While doing these changes in layout security point is also

considered so they have to make layout as back office function and
customer contact point is interconnected.

Cabin of branch manager is close to the door through which people

easily approach to them in case of facing problem.
CONNECTION……

Earlier it was sellers market so customer had limited options to

choose from so such a layout with minimum space for customer
was justified.

Now since its said “Customer is the King” so SBI has to change
its layout accordingly.

AS now SBI has to become one the options which customer

actually selects
INSTANCE

The SBI branch of MNNIT was earlier having two gates which
customer had to cross before entering in the branch which has to
be reduced to just one thereby:

 Increasing the space available to customer

 Providing easy access

APPROACHES

Officials of SBI want to reach their customer which they do so by

building strong and reliable relationship with them

They frequently communicate by organizing meetings with

• Automobile dealers
• Cold storage dealers
• Tractor dealers
• Petrol pump dealers
INSTANCES OF SUCCESS

When AGM Narendra Mishra work as Chief manager in SBI

Pratapgarh its value is about Rs.35 crore after he join that
branch he was done changes in layout as customer oriented and
in back office function and the most important as good
scheduling of employee and when he left the value was
approximately Rs. 120 crores.

In Allahabad all the automobile retail outlet is now came under

SBI just because of its trust and commitment.
INSTANCES OF SUCCESS contd…

A branch of SBI in Govindpur started in September 2011 and its

target is 5.5 in 1 year upto this time it goes beyond 6 and now this
branch is recommended for super circle of excellence.

SBI has this year increased its market share in Allahabad upto the
extent of Rs.50 crore which obviously it took away from the grab
of other banks which become a live example of beating the
competition
Conclusion:

In the conclusion we would say that SBI has achieved what it

needed to achieve over the period of years by introducing
innovative schemes and successfully banking on them.

At the same time we would conclude that SBI needs to focus on

the human resources in a more effective and useful manner so
that they can manage to retain and expand their market share.
 A Special thanks to
Mr. Narendra Kumar Mishra, AGM, State
Bank of India, Regional Branch Allahabad
(Varanasi Module)

Mrs. Anju Agarwal, Senior Clerk, SBI Main

Branch, Allahabad
 References

www.indianbankinginsdustry.com/pdf

www.statebankofindia.co.in

www.rbi.org.in/annualreport/09-10.doc

www.emeraldinsight.org/sbicasestudy.doc

www.wininsight.org/strategyformulation.pdf

(retrieved between period of 1st to 12th March,

2011)